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The Skinny on Minimum Essential Coverage (MEC) Plans

Minimum Essential Coverage (MEC) plans or “skinny plans” may not be new, but they may have value in some situations.

Limited protection coverage plans have both pros and cons for employers and employees.

How do you know if a MEC plan could be an option for your business?

  • MEC plans generally cover preventive and wellness-related tests and treatments. While they meet specific requirements outlined under the Affordable Care Act (ACA) and ERISA, they are not what most think of as traditional health insurance. Historically, these kinds of bare-bones coverage plans are offered by restaurant chains, hotels, retailers, and other lower-wage industries.
  • MEC plans may also have value in conjunction with at least one health plan that does qualify under ACA standards.
  • While less expensive, this coverage option provides limited protection and isn’t for everyone.

MEC plans offer particular advantages and disadvantages. We’ve compiled a list below to consider:

MEC Plans Can Offer Significant Advantages

Businesses with more than 50 employees that provide these plans to their workforce satisfy one portion of the ACA’s large employer mandate and avoid paying an assessment per full-time employee for not meeting the minimum essential coverage employer requirement. In addition, the employer contribution is tax-deductible.

MEC Plans Can Save Employers Costs Related to Benefits

Because they offer minimal coverage, the cost is less than traditional group health insurance. The premiums can be paid by the employer, the employee or co-funded.

The Details are Critical

While MEC plans eliminate the per employee penalty, employers should be aware that these plans do not protect them from the second portion of the ACA’s large employer mandate (offering coverage that is deemed affordable and provides minimum value) penalty per each employee who goes to a public exchange and qualifies for a federal subsidy.

MEC plans only offer the most basic level of benefits required under the ACA and may not be viewed favorably by employees unless combined with other policies. OneDigital often recommends combining with a limited medical plan for companies considering a MEC plan. This combination provides additional, restricted coverage for routine doctor visits and hospitalization. Again, this is not traditional health insurance and still can expose the employer to the penalty. When wrapped together, these policies can be more appealing to the workforce and much more affordable than standard indemnity health plans.

MEC Plans Are Not a Solution for Every Employer

New ACA regulations create enormous challenges for companies with more than 50 employees that traditionally have not funded group health benefits for a large percentage of workers or cannot afford to continue offering traditional health plans. Many of these businesses may have a large contingent of part-time, hourly employees. With ACA full-time employment status lowered to 30 hours a week, MEC plans could be a viable solution for specific industries based on factors such as compensation and employee retention.

For more information and to craft a strategy that fits your unique needs, reach out to your OneDigital consultant. Bookmark OneDigital's Compliance Confidence blog to stay up-to-date on the latest employer guidance.